Clarity on the future of energy support needed after new Bill cuts relief


The government has confirmed it will continue to subsidise businesses’ energy costs until 31 March 2024, but said the rate of support will be reduced from April 2023.

A new Energy Bills Discount Scheme will be brought in from 1 April 2023 until 31 March 2024 which will offer a discount on wholesale prices of gas and electricity, rather than a fixed price.  It means that business customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97 per mw/h applied to their gas bill and a unit discount of up to £19.61 per mw/h applied to their electricity bill.

Businesses with energy costs below £107 a MWh for gas and £302 a MWh for electricity will not receive support.

The government said this meant a typical pub would see a taxpayer funded discount of up to £2,300 over 12 months.

Responding to the Chancellor announcing the Government’s new Energy Bills Discount Scheme, UKHospitality Chief Executive Kate Nicholls said: “It was crucial for hospitality businesses to receive an extension to energy support, which has been a vital lifeline for many this winter.

“While I’m relieved the Chancellor has listened to UKHospitality’s concerns and extended the scheme as a whole, the absence of a sector-specific package that helps vulnerable sectors like hospitality will still result in higher bills. Our analysis shows the new, lower level of support will see a total £4.5 billion hike in bills for the sector compared to the previous scheme.

“This will simply be unsustainable for many. With no further, dedicated support for a vulnerable sector like hospitality, I’d urge the Government to consider other measures it can take to help the sector. One measure in particular that would make a significant difference would be increasing the business rates relief cap. For those suppliers to hospitality in the wider food and drink sector that have received additional support, we expect them to support the sector accordingly in their pricing.

“Now we have some clarity on the future of energy support, we must see a concerted change in behaviour by energy suppliers, who have been unfairly treating businesses with outlandish quotes and unjustifiable demands for enormous deposits or pre-payments. Government must act swiftly if this is not forthcoming.

“This scheme is a significant investment from the Government and energy suppliers should not be using that as an excuse to hike up prices. The Ofgem review into the non-domestic market should serve as a wake-up call to suppliers that now is the time to be reasonable with the quotes they’re offering and to abandon unfair demands of businesses to secure fixed deals. They should also consider allowing businesses to renegotiate if they are stuck on previously agreed, inflated fixed deals.

“This is an extremely challenging period for the UK’s hospitality sector, which is so important to the economy and communities, and it’s essential the sector gets through it as best it can. If it does, I’m confident we can reach a situation where hospitality will return to generating economic growth, delivering hundreds of thousands of jobs, and investing in Britain’s high street and communities. This is all while it contributes billions to Treasury revenues.”

Martin McTague, National Chair of the Federation of Small Businesses (FSB) said of the decision “to all but eliminate help through the Energy Bill Relief Scheme (EBRS) is a huge disappointment for small businesses.  For those struggling, the discount through the new version of the scheme is not material. Many small firms will not be able to survive on the pennies provided through the new version of the scheme.

“This is so out of touch. Two pence off a kwh of electricity and half a pence of gas is totally insignificant for small businesses, despite costing billions to the taxpayer. The Government will inevitably have to come back.

“The current EBRS scheme provides certainty for a small business owner over their rates, and has made a material difference to the survival of many small businesses. The replacement scheme will do neither.

“In addition to the withdrawal of the vast majority of support to cope with high energy prices, this decision also risks inflation as small businesses bills rise, but their prices will rise at the same time.  The EBRS original scheme suppressed inflation by 5% points, but this has been cancelled, today.  Slashing support will drive higher inflation, just as we enter a recession.”

“Our latest research shows one in four small firms anticipate to either close, downsize, or radically change their business model when the Government reduces energy support after March. Five days after the Prime Minister’s pledges to restore optimism and hope and grow the economy, small firms will feel let down by the Prime Minister’s decision to call-in the scheme decision planned for December, and cutting back the scheme to such a minimal state.”

“What’s certain from this catastrophic move is there’ll be a cliff edge after March. The small fish and chip around the corner, your local pub, and the family-run independent laundrette – all will see much higher bills.  That’s on the Government.

“Dividing the scheme into two tiers is sensible, but not so that the tier of support for any small businesses lighting or heating premises or using freezers or ovens, has been set so low to mean support diluted to such a feeble level. It would have been better value for money for small firms if the £2bn cost of their element of the scheme to improve energy efficiency, to reduce the need for energy from the grid.”



Category: News
Tags: Energy Bills Discount Scheme, Federation of Small Businesses, UKHospitality